Where Are Fuel Prices & Boating Heading?

I remember when we thought we had high fuel prices. It was 1981. I was looking for a boat. Fuel prices had risen during the seventies. I was kicking around docks and listening to boaters tell me how sailboat prices had increased for two reasons, both of them fuel related. First: The demand was higher. Sailboats didn’t burn much fuel. The second reason hurt: sailboats were made of fiberglass and the price of resin was tied to the price of fuel. That meant that I could better afford to boat if I didn’t have to spend money on gas or diesel, but it also meant that I had to spend more for the boat.

That was 27 years ago. Boats cost about $1,000/foot then. I bought a new Cal-25 Mark II for $24,000 at the Atlanta Boat Show, put it on Lake Lanier, and sailed to my hearts content. Well, almost. You never quite get enough once you fall in love with boating.

Take a look at the following graph, provided courtesy of WTRG Economics, and you can see that we are in a similar situation to 1981 with regard to increase in the price of oil, but much worse and trending higher.

We all know that everybody thinks that boaters are wealthy people. Well, some are, but most of us just love being on the water and choose to put our “disposable” income into a boat rather than airline tickets, other vacations, fancier cars or homes. We subsequently have to pay more for our perceived wealth. To conveniently buy our boat accessories in specialty stores, we often pay literally 10 times more than charged in hardware or other stores.

Boaters who are spending millions to buy megayachts probably won’t flinch at the increase in fuel prices. The price of fuel to them is such a small part of their boating expenditure that it doesn’t impact them much. For the rest of us, it is an entirely different story.

What will happen to the price of boats? Boats are usually constructed of fiberglass and that requires resin. Spartech is a major supplier of resins to the marine industry. In November, 2007, this is what they had to say to their wholesale customers:

“Spartech Color & Specialty Compounds

Dear Valued Customer, November 30, 2007

As we move to the end of this year, more back to back price increases continue to be implemented and announced by our resin and raw material suppliers. Higher energy costs, high demand for exports, and higher operating costs are the reasons being sighted for these increases…“

Well, that sounds rather ominous for boat building prices. Their price increase announcements have occurred almost monthly since. Again, I remember the similar ominous conversations that occurred in boat cockpits in 1981.  All of the owners were talking about how glad they were to have already bought their sailboats.

What about the post production cost of transporting that little mini-yacht upon a gas-guzzling wide-load truck to your state? And what about all the fixed costs of the buildings and employees, and the other energy required to run businesses with high energy costs? The picture of the price of new boats looks rather grim. When demand goes down, the price doesn’t necessarily follow. With fewer units being sold, manufacturers still have to pay these expenses, regardless of whether they are selling one boat or a thousand boats. That can convert into higher prices for fewer boats sharing those costs. Undoubtedly, there will be more manufacturers who fail to make ends meet and have to close their doors.

What will the demand shift be between power and sailboats? On May 2, 2008, gas or diesel cost $4.49/gal at the dock in Shilshole Bay Marina, Seattle, Wa. Many power boats will easily burn 1 gal. or more per nautical mile. A typical sailboat that has to power along when it has no wind will still be able to burn only about a gal or less per hour. On our 41 foot sailboat, we will burn about 1 to 1.5 gal/hr and get about 7 or 8 miles, or about 4 to 6 mpg. That’s not really great, but it is 4 to 6 times better than the power yacht, and that is only when we must power. Otherwise, the sailboats are using the wind.

Alternative power can help cut the bill. Consider using wind and solar electric power too. A good set of batteries, a high output alternator, solar power, and a wind generator can cut the time you have to burn that expensive diesel. If you live in a sunny, windy area and plan well, you may be able to restrict your use of the engine to only that needed for infrequent motoring around anchorages and marinas.

New boat prices are already mast high, but there are lots of fine used sailboats on the market. They last a long time and rarely go to the “junk yard”.

It may not be 1981 anymore, but if you already own your sailboat you are probably a happy camper. If not, I would look for only higher prices. Demand will be impaired somewhat by the general hard times that most of us are feeling now, but new fiberglass boats can’t be built for anywhere near the same money with costs skyrocketing. Babyboomers are aging and aging boaters often make the switch to power. I wouldn’t look for such an impetus in these days.

Another fun way to cut costs is to bring your boat to Mexico. Fuel isn’t cheap here, but it’s about 1 to 1.50/gal cheaper than the states. It’s also sunny and with enough wind to sail. See ya soon, I hope.

BOATMEXICO WEBSITE UPDATE

I’m a little shy to say too much or promise too much about when software developers will complete their work. Those of you who have been waiting for us to open our true website understand what I mean. However, we believe that we have a good developer this time. Yesterday, we were told that our design and development is proceeding well and that we are still on target for a mid-Jun website opening. That is the best I can tell you. We will do everything we can to have our fabulous website ready for you to plan you sail into our 2008-2009 season.

The hurricane season is approaching us in Mexico now. Just a reminder to those of you who have your boats here, insurance companies will often not cover your loss if a hurricane strikes and you have not removed all of your sails and canvas. Check with your insurance company and be sure that you are in compliance with their requirements. Our home office is in Puerto Vallarta. If we can assist you in any way, please send an email to admin@boatmexico.com

This entry was posted on Sunday, May 18th, 2008 at 11:53 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.